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Microsoft today announced the start of the Windows 7 Upgrade Option program as well as pricing details for the new operating system.

Windows 7 pricing

For Windows 7, Microsoft is reducing the price on their most popular retail product for customers, the Home Premium Upgrade, by approximately 10% (depending on the market). In the U.S., this means a customer buying Windows 7 Home Premium upgrade will pay only $119.99 instead of the $129.99 being charged today for its predecessor (Vista)

The estimated retail prices for upgrade packaged retail product of Windows 7 in the U.S. are:

Microsoft will not offer upgrade versions to customers in Europe, forcing them to do clean installs. While customers elsewhere in the world will be able to run a simple upgrade install, preserving their data, settings and programs, Europeans will have to make manual backups and reinstall software after installing the new OS.

Microsoft will not have a separate upgrade SKU for the packaged retail product versions of Windows 7 at GA (General Availability). Hoever, the company will be offering upgrade pricing on their full licenses to make sure that European customers who want to upgrade have the pricing options available in the rest of the world.

Microsoft is also offering people in select markets the opportunity to pre-order Windows 7 at a more than 50% discount. In the US, this will mean users can pre-order Windows 7 Home Premium for USD $49.99 or Windows 7 Professional for USD $99.99. Users can take advantage of this special offer online via select retail partners such as Best Buy or Amazon, or the online Microsoft Store (in participating markets).

This program begins tomorrow in the U.S., Canada and Japan. The offer ends July 11th in the U.S. and Canada and on July 5th for Japan or while supplies last. Customers in the UK, France and Germany, can pre-order their copy of Windows 7 starting July 15th and will run until August 14th (or supplies last).

Under the program, designated PCs pre-installed with premium versions of Windows Vista will qualify for licenses of the equivalent Windows 7 product.

"Starting June 26th, any customer who buys a PC from a participating computer maker or retailer with Windows Vista Home Premium, Business or Ultimate will also receive an upgrade to the corresponding version of Window 7 at little or no cost," said Brad Brooks, corporate vice president, Windows consumer marketing at Microsoft.

In association with the Windows 7 Upgrade Option program, Microsoft will defer approximately 50% of the revenue from eligible sales under the program to the earlier of the program fulfillment date or the program?s expiration. For the fourth quarter fiscal year 2009, Microsoft will defer an estimated $200 to $300 million of revenue. The deferral only impacts the timing of revenue recognition and will not impact cash flows from operations. The Company made a similar revenue deferral for the Windows Vista Technology Guarantee program during the 2007 fiscal year.

Under the Windows 7 Upgrade Option program, the following Windows Vista versions will correspond to the following Windows 7 upgrade equivalents:

The Windows 7 licenses will be provided to computer manufacturers at no charge from Microsoft; some manufacturers may require some modest payment for costs such as shipping and handling. This program is generally available through January 31, 2010 from computer manufacturers and participating retail partners selling qualifying editions of Windows Vista.

Retail packaged Windows Vista software products may also qualify for an upgrade to the equivalent Windows 7 product with participating retailers in participating markets. The Windows 7 licenses may be offered for free or at a discounted price to qualifying customers when the Windows 7 product becomes available in the market, on October 22nd.